A sign hangs at Silicon Valley Bank’s headquarters in Santa Clara, California on March 10, 2023.
Noah Berger | AFP | Getty Images
More than three hundred venture capital firms have signed a joint statement pledging to do business again with Silicon Valley Bank if it is “acquired and adequately capitalized” after the financial institution failed on Friday.
Regulators closed SVB and seized its deposits on Friday after a run on the bank on Thursday.
Prior to the bank’s failure, SVB CEO Greg Becker had announced a sudden need to raise $2.25 billion to strengthen the financial institution’s balance sheet overnight Wednesday. A dramatic wave of deposit withdrawals followed on Thursday.
Shares in the bank plummeted and triggered a trading halt on Friday before California regulators took over.
The SVB failure marks the largest in US banking since the 2008 financial crisis and the second largest ever.
Some venture firms raised their own money and instructed their portfolio companies to withdraw their deposits from SVB before the race. Reportedly, Founders Fund, USV and Coatue were among those who did.
Other venture investors lamented that the directives from influential firms, while cautious in a way, helped jump ship a bank that had long been a trusted financial partner to tech startups and the firms that invest in them for decades.
The Federal Deposit Insurance Corporation (FDIC) will cover up to $250,000 per depositors and may start paying depositors under this cap as early as Monday. However, it remains to be seen how much of the deposits on SVB’s balance sheet will be fully or partially returned, and whether there is an immediate buyer ready to take over the bank’s activities.
In 2008, JPMorgan Chase acquired Washington Mutual Bank in a transaction facilitated by the FDIC.
As CNBC has reported, big names in technology and finance have called on the federal government to take dramatic action to protect depositors who were not under the $250,000 insured cap. Their biggest concern is that failure to protect deposits above $250,000 could cause a loss of faith in other medium-sized banks.
Venture firms including Accel, Cowboy Ventures, Greylock, Lux Capital and Sequoia were among the 325 firms that had signed the letter Saturday night in California, expressing willingness to work again with SVB under new ownership.
The joint statement was shared by many individual venture capitalists on social networks after the bank failure. It said:
Silicon Valley Bank has been a trusted and long-standing partner of the venture capital industry and our founders. For forty years, it has been an important platform that has played a central role in serving the startup community and supporting the innovation economy in the United States.
The events that have unfolded over the past 48 hours have been deeply disappointing and troubling. In the event that SVB were to be acquired and capitalized appropriately, we would be strongly supportive and encourage our portfolio companies to resume their banking relationships with them.”
Read the statement and the full list of investors expressing support for SVB.